Prime Rental Inflation in Regional Markets Outperforms London

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Growth Continues in Prime Property Markets

According to the latest Savills property market analysis, prime residential markets now appear to have settled at a steadier growth rate due to shifting market conditions.

Various reports over the past few months have indicated a considerable change in market conditions, leading to an overall decrease in the rate of rental growth. However, in the first quarter of 2024, Savills has observed a rise in prime rents across both London and regional markets.

Prime London rents increased by 0.3% in Q1, “a promising sign” after the slight price dip in Q4 2023 (-0.1%). Annual growth registered at 3.2%, representing the sixth quarter in a row with a slowdown in growth.

The data for regional markets shows a more significant increase of 0.9% for the quarter and 4% year-on-year.

When comparing figures from March 2020 to the current data, it shows that rents are still substantially higher – 17.7% higher in London and 23.9% in the regional markets.

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How Are Prime Rental Market Trends Changing?

The report revealed that flats outperformed houses in quarterly rental growth in prime central London and prime regional markets.

Rental inflation for prime central London flats experienced 0.6% growth, while house rents grew by 0.3%. Flats in regional markets had an average rent increase of 1.2%, while houses trailed behind with 0.8%.

Affordability has been a big issue in the broader rental market, with high London property prices impacting rental growth. This appears to have expanded to prime markets as well. Headline wage growth has eased, and more emphasis has been put on the amount renters can pay, even in prime markets where tenants typically have a much more flexible budget.

Savills suggests that landlords’ rental expectations have stayed positive in Q1. Higher mortgage rates have had a negative effect on many landlords’ profits, but higher gross yields as the result of record rental price growth in the past three years should encourage continuing investment in the private rental sector.

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What Will the Prime Rental Market Look Like in 2024?

According to Savills, prime rents will continue to increase in 2024, but at a comparatively slower rate compared to the past few years as the extreme supply-demand imbalance has begun to ease. Affordability constraints will add to this more subdued rate of growth.

They predict that most of the growth will occur in the summer when the market is typically busy.

Private investors have remained in the market despite the various regulatory changes and outside economic pressures, and the currently strong average yields will encourage continued investment in the buy-to-let sector. However, available stock is likely to remain somewhat limited, meaning rents are likely to keep rising. Savills have forecast growth of 7.2% leading to 2028 across prime London and 6.7% in prime regional markets.

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Author

Jessica Ferris

Jessica is a property content writer at RWinvest. Keeping a close eye on the UK property market, Jessica helps our readers stay informed and up to date on the latest market news and statistics.